Operating Principles

As a supplement to our Corporate Philosophy, we have evolved a number of operating principles. While they are not cast in stone, we feel that the following principles are critical to our ongoing success:

Planning Growth

Strategic Directions: We are singularly interested in products, services, and marketplaces of substantial potential, where we can be an ever-growing leader and industry standard through offering superior business solutions and providing world class service. We prefer markets where our solutions have significant value-added uses to clients (not mere commodity-like offerings), or where we are well equipped to outshine competitors so that our success cannot be easily emulated. We most favor directions where we have the greatest chance of becoming the market leader, because a casual or small participant seldom can maintain an adequate return on managerial and financial resources.

Innovation - Selectivity and Focus: New ideas, products, and services are exciting. We need a continuing array of new ideas, and must recognize and reward associates who produce them. At the same time, it takes focus and self-restraint to maintain the discipline of thinking and researching very broadly, while implementing more narrowly. Many organizations tend to pursue more projects than they can effectively handle. We must balance reward and distraction. Nonetheless, we will try more new directions than we need in order to leave room for the inevitable disappointments. And since major new projects or directions are especially difficult and uncertain, we aspire to focus our best associates on these newer opportunities, as full-time champions.

Unless regularly challenged, many organizations tend to allocate resources by inertia and tradition rather than by priorities and results.

Business Plans: Good plans help maintain consistent growth with fewer surprises. The specific objectives, priorities, strategies, and processes in strategic and operating plans should be initially guided by senior management, and then be directly created in more detail by each manager who must ultimately own responsibility for the results. The planning processes should be interactive and responsive to differing views.

Associate Development: Associate training and learning are critical components to our being an employer of choice and for realizing consistent revenue and earnings growth. We are committed to providing each associate with 40-hours a year of consistently high-quality training through classroom and e-training courses. This training will be specific to each position within the company. Each associate will, therefore, have the ability to gain access to the training resources required (i) to succeed in his or her current position and (ii) to acquire the skills necessary to achieve a future position. To that end, we are committed to continuous associate development, succession planning, career-pathing, and recognition of superior performance.

Organization Structure

In our business environment, the best decisions, best attitudes, and best efficiencies are usually attained through substantial delegation, empowerment, and self-sufficiency. We encourage operational decentralization to the fullest practical degree as is consistent with world class service, efficiency, highly automated and standardized systems, and centralized Corporate Headquarters oversight. While each business unit must inform Corporate Headquarters of important issues, decisions and problems, each business unit is responsible for making all day-to-day operational and client decisions, consistent with Corporate guidelines.

We recognize that certain policies and functions should clearly be and remain centralized “shared services” to varying degrees, depending upon the need for uniformity, cost efficiency, and/or specialized knowledge. Regardless of location, all functions must cooperate and work together to achieve our common goals.

Excess layers of management increase costs and retard communication and responsiveness. We aim to keep working units lean, small, and cohesive enough to empower associates and to give them a clear sense of their mission, their accomplishments, and their accountability.

Risk Management

Risk vs. Reward: We want to pursue substantial long-term revenue growth while preserving, to the fullest degree reasonable, ADP's history of consistent revenue and earnings growth. This consistency is worth protecting because it enhances our financial standing and predictability, and is an important component of shareholder value.

Evolution vs. Revolution: In ADP's businesses, most improvement is best attained in manageable increments by evolutionary change, to ensure continued world class service to clients as change is implemented. Conversely, big successes in new directions, or urgent quantum gains with existing clients, will occasionally necessitate revolutionary strategic leaps. We favor the incremental approach where large numbers of decentralized activities and clients are involved, but only to a degree that does not unduly sacrifice our competitive position. We must continually challenge our activities and methods so that we aggressively upgrade our technologies, products, services, and processes, and minimize the need for a catch-up revolution.

Role Before We Roll: Since many new ventures will fail, we will generally try to minimize the cost of failure to a manageable level by not acting on an unnecessarily large scale too soon. Changes that involve many clients and associates are particularly difficult and error-prone.

As we change processes, we must minimize the risk of a poor transition. We should role-model, inspect, and stress-test new products and approaches before we roll them out to many locations, clients, and/or associates, without forfeiting windows-of-opportunity that require fast time-to-market.

Special Outside Relationships

Business Friends: Many prospects and clients are introduced to ADP by third-party recommendations from accountants, trade associations, franchisers, and bankers. We must maintain effective and proactive communications and relations with our business friends.

Suppliers: Suppliers are good business partners and are critical to our success. We expect suppliers to earn our continuing relationship, as we must with our clients. We expect the best service and prices that a supplier is offering to any equivalent customer. We, in turn, will fulfill our obligations promptly and deal in a forthright, open manner. We should always have back-up sources.

Community: We support worthy sectors of our society with both effort and money. Our pro bono activities encompass financial support (through the ADP Foundation), and contributions-in-kind. Our primary areas of philanthropy and leadership are education, health, the arts, and social welfare.